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Cash crunch leaves Gazans using tattered notes

Desperate Gazans crowded into banks on Monday, jostling to get to the front of lines as they raced to withdraw money from accounts that have become largely inaccessible due to Israeli sanctions.
/ Source: The Associated Press

Desperate Gazans crowded into banks on Monday, jostling to get to the front of lines as they raced to withdraw money from accounts that have become largely inaccessible due to Israeli sanctions.

Israel has refused to allow currency notes to enter Gaza in recent weeks as part of its strategy to put pressure on the ruling Hamas militant group. With the cash supply dwindling, banks have limited withdrawals over the past two weeks, and some have posted signs telling customers they cannot take out any more money.

The U.N. stopped distributing cash handouts to Gaza's poorest last week, and economists and bank officials warn that tens of thousands of civil servants won't be able to cash their paychecks when they get their salaries next month.

"No society can operate without money, but that's the situation we are reaching in Gaza," said Gaza economist Omar Shaban.

Israel and Egypt have restricted movement through Gaza's border crossings since the Islamic militant Hamas seized control in June 2007.

Since then, closures have been eased or tightened, depending on the security situation. But even in quiet times, when Gaza militants refrained from firing rockets at Israeli border towns, only limited shipments of food, medicine and commercial goods were allowed in.

Israel has not allowed cash into Gaza since October. Earlier this month, it tightened the blockade further in response to rocket fire. The latest closures led to widespread power blackouts, disrupted water supplies and caused severe shortages of cooking gas and flour.

On Monday, Israel allowed in 30 trucks of food and medicine. It also enabled diesel fuel to reach Gaza's power plant, according to EU officials just enough to keep it running for a day. Aid officials said, however, the deliveries would have little impact on dire shortages of basic goods.

Shortage has little effect on Hamas
Israel has said it keeps out the cash because it fears Hamas will use it to fund attacks. But the shortage has little effect on Hamas, which funnels money into Gaza through smuggling tunnels from Egypt. The militant group distributes cash to its own loyalists and the thousands of people it employs in its network of social services. It does not deal with the formal banking system.

The Israeli shekel is a widely used currency in the Gaza Strip, and the territory needs at least 400 million shekels, or about $100 million, each month in new currency to replace aging notes and to pay salaries, economists say.

The main source of currency is the moderate Palestinian government in the West Bank, which sends cash shipments each month to pay 70,000 civil servants. The government still claims authority over Gaza, despite losing control of the territory to Hamas last year.

Shaban, the economist, said the cash crunch worsened because residents tend to keep savings at home, rather than in banks. Gaza businessmen pay in cash for goods imported from Israel, further bleeding money out. Gaza's tunnel smugglers, who bring diesel and goods into Gaza from underground passageways linked to Egypt, also pay in shekels for purchases.

Jihad al-Wazir, who heads the Palestinian Monetary Authority in the West Bank, said his agency has asked Western officials to pressure Israel to allow in cash for payment of the December salaries. International Mideast envoy Tony Blair and the World Bank have also contacted Israel.

Israeli defense officials said they had not ruled out further cash transfers, but said nothing could be delivered while fighting persists.

Shlomo Dror, an Israel Defense Ministry spokesman, questioned the seriousness of the shortage. "We are used to the Palestinians inventing things and we are looking into their claim," Dror said.

Salaries withdrawn in installments
In Gaza, some residents head to the banks almost daily to withdraw their salaries in installments.

"I'm begging the bank to give me shekels," said civil servant Shawkat Othman, who stood in line for four hours this week. His bank informed customers they could only withdraw 700 shekels ($175) at a time.

The U.N. Relief and Works Agency has halted cash handouts to 98,000 of Gaza's poorest, said a spokesman, Chris Gunness.

ATMs in Gaza City dispense U.S. dollars. But most Gazans avoid withdrawing dollars, because they would then have go to money changers to convert them to shekels, for a fee. Few stores accept credit cards.

"I've got only 30,000 shekels ($7,500) left to exchange," said Abu Radwan, a money changer. "I have a new rule — I only accept $200 at a time," he said.